Why new Obama budget drops Social Security reform like a hot potato (+video)

With midterm elections and control of the Senate up for grabs, President Obama opted to shelve his 'chained CPI' proposal that would have affected Social Security benefits. Many Democrats welcome the move.

By , Staff writer

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    Demonstrators form a symbolic chain to protest against a proposed change in the formula for determining annual Social Security benefits, on July 2, 2013, in Philadelphia. President Obama has dropped the proposal in his fiscal 2015 budget.
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Help Democrats win an election first, kick-start a debt-reduction plan some other time. That seems to be President Obama’s budget strategy this year.

Mr. Obama is leaving Social Security reform out of his proposed budget for the 2015 fiscal year that starts in October, White House spokesman Josh Earnest said Thursday.

This doesn’t mean the president is unwilling to consider major ideas for reducing the long-term growth of public debt. And it doesn’t mean that he now opposes the specific idea he put in last year’s budget, an adjustment called “chained CPI” that would reduce annual benefit increases for Social Security recipients.

Recommended: How much do you know about US entitlement programs? Take our quiz.

But it does put his policy stance onto politically firmer ground – just as an election season is ramping up, with control of the US Senate up for grabs. [Editor's note: The original version of this paragraph and the subhead were changed to clarify which house of Congress is contestable in this year's midterm elections.]

He’s no longer the nation’s most visible advocate for chained CPI (shorthand for an alternative way of calculating the Consumer Price Index, or inflation).

Reform ideas that squeeze the benefits of seniors aren’t exactly proven vote-winners, after all. Although the American public is worried about the federal debt and deficits, polls don’t find much support for paring back on Social Security.

Obama’s budget strategy also plays directly to the liberal stalwarts who make up the base of his party. Their dollars and door-to-door campaign energy could be pivotal in key congressional races, and they’ve been upset by moments when Obama has veered from the traditional Democratic playbook. The chained CPI idea last year was a significant case in point.

“It's great news that President Obama has decided to remove these cuts from his upcoming budget proposal,” expected in early March, said Anna Galland, executive director of the liberal group MoveOn, in a statement following Mr. Earnest’s remarks. “MoveOn members thank the President for listening to the concerns of his constituents and putting the well being of the American people first on this issue."

Similarly, Stephanie Taylor of the Progressive Change Campaign Committee called the move a big victory that “greatly increases Democratic chances of taking back the House and keeping the Senate.”

For his part, Earnest framed Obama’s shift on chained CPI as a move rooted in progress over the past year on federal deficits and in Congress’s welcome shift back toward “regular order” in the budget process.

Moreover, as the economy improves, tax revenues are rising, even as budget deals since 2011 have brought federal spending down. In his question-and-answer session with reporters at the White House Thursday, Earnest said Obama’s 2015 budget will outline a path resulting in a federal deficit below 2 percent of gross domestic product (GDP) in 2024.

Earnest allowed that more efforts to control the national debt are needed. But he argued that olive branches from Obama to Republicans (like the chained CPI proposal) aren’t as needed now as they were a year ago.

After years of failing to pass a budget, he noted, Congress recently agreed to a budget deal brokered by Rep. Paul Ryan (R) of Wisconsin and Sen. Patty Murray (D) of Washington. The Obama budget will hew to the Ryan-Murray targets for spending restraint, Earnest said.

Fair points for an Obama spokesman to make. But Republicans could spin the decision on chained CPI their own way and have promptly done so.

“This reaffirms what has become all too apparent: The president has no interest in doing anything, even modest, to address our looming debt crisis,” said Brendan Buck, a spokesman for House Speaker John Boehner.

For the record, many economists view the chained CPI as a more accurate way of gauging inflation in the annual adjustment of Social Security benefits – and hence as a relatively easy first step in reforms to ensure the program’s solvency. But support for chained CPI among economists is far from unanimous.

In this election year, the two parties appear locked into positions that make a large debt-reduction deal unlikely. Republicans, including Mr. Buck, call tax hikes a “nonstarter,” while a core principle for the White House is not to erode entitlement benefits (as chained CPI would do) without requiring well-off Americans to pay higher taxes.

Many budget experts say that, despite the recent progress on federal deficits, delaying the difficult question of entitlement reform is unwise.

The nonpartisan Congressional Budget Office warned in a blog post Thursday that the national debt is “quite high by historical standards” and appears on course to keep growing – especially due to Social Security and health-care entitlements.

The CBO said federal borrowing will generally mean lower national savings available for private sector investment, so that Americans’ wages “will be smaller than if debt was lower.” In addition, high debt can make a fiscal crisis more likely, and it leaves Congress less financial wiggle room to respond to recessions or national emergencies.

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